Here below is an excerpt of my upcoming FARJHO article to be published in March.
Governments who set up policies using those ill-advised primitive methods (e.g. the original HOPE for Homeowners proposal in 2008) have only destroyed people’s confidence in the equity sharing concept to solve the problems and let the mortgage foreclosure problems deteriorate further day by day. The Hope for Homeowners (H4H) Program is a loan program that was a part of the Housing and Economic Recovery Act of 2008. The guidelines for the product were released by FHA on October 1st, 2008.
In the original HOPE for Homeowners (H4H) offering, the Federal Reserve together with the HUD Team proposed a non-free market based arbitrary equity sharing scheme for debt principal reduction as (Ref 3)
100% if the property is sold after 1 year
80% if the property is sold after 2 year
70% if the property is sold after 3 year
60% if the property is sold after 4 year
50% if the property is sold after 5 year
There were few takers. Any further consideration by other national policy makers and economists of using equity sharing related concepts to solve our country’s severe housing-led economic problems on a large scale also quickly died with it too for now. The incompetence of these policy makers is indeed very unfortunate and lamentable.
The worrisome part is that even when the top level politicians change posts later on these same technical middle level managers may still be the ones that will continue to squat on the same positions at the Fed and at the HUD since these subject matters may be deemed too technical for the top level politicians or top level policy makers to mess around with.
Will a new President make any difference?